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432 Park is symptomatic of a larger issue, not just what its small footprint (and tall lanky box) has. The half empty building shouldn't be in quotes. It's pretty well established that virtually all units are not used as primary residences.
The Drake Hotel was a hotel--sure, it's a big building as it took up the same footprint, but 432 Park Avenue is a far taller building than what was there previously and it's almost certain that the Drake Hotel had more people in it at pretty much any time except for during 432 Park's construction since it was a hotel in a high demand area and there were a lot of people employed by it.
432 Park has amenities and maintenance that are fully staffed year round regardless of how many people reside in the building (such as the front desk and a restaurant and other services, that the residents are required to pay for). There is also daily/weekly maid service for those unoccupied apartments. They have to be "ready" and in presentable condition when the owner shows up, with no dust or anything.
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Does it matter that these people pay a bunch into maintenance fees for the unit? That's not direct tax revenue--that's money that goes into the company that manages the building which has no guarantee of being put into the local economy because there is no reason why the people of that company need to spend it in NYC.
Are you seriously arguing that a modern supertall condo tower like 432 Park is bringing less property tax revenue for the city than a dingy 20 storey outdated hotel that was demolished? Come on, thats not even an argument.
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$16K is a pittance compared to what they are supposed to be paying in property tax were they to be taxed fairly with the same kind of assessment and rates that every other home owner in NYC does. How does it make sense that the extremely wealthy should be held to a different standard than everyone else for the property tax rate they should pay?
1. All other NYC condo homeowners qualified for the same tax abatement. My parents did for their condo in Brighton Beach.
2. The tax abatement is not permanent, its only for a set amount of time. I believe the owners at 432 Park didn't even get the best deal. I believe owners at 432 and One57 only got a 10 year deal, while the standard for NYC condo owners is 15 to 25 years.
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This is a pretty hard sell--and even harder given that what was replaced was a hotel which likely generated an order of magnitude greater revenue for the city's coffers and was much less of an eyesore.
Again, there is no way that hotel was generating more property tax revenue for the city than an ultra luxury tower 4 times its size. The hotel's business was spread over other NYC hotels (NYC is building those as well!), the net revenue into the city budget went up.
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Originally Posted by OyCrumbler
And to a circle back--this is still missing the greater point being made in the first place which was these luxury constructions do little in addressing supply issues for the people actually living in the city.
Luxury constructions in NYC, such as 432 Park, account for maybe 1% of the total contruction in the city.
That doesn't help residents of the city if a large part of the market demand is from wealthy investors living abroad who basically drive a lot of new construction and then leave it empty for the most part. Sure, you can ostensibly create enough supply eventually that will satisfy the global investments, but that's a lot of supply to make before it stops getting screwy for the local resident.
There are only so many rich people around to invest in luxury condos. If there's demand for both luxury and affordable housing, and room for both, both will be built. If there's not enough room for everything due to zoning, then of course, developers are gonna focus on luxury housing.
432 Park has amenities and maintenance that are fully staffed year round regardless of how many people reside in the building (such as the front desk and a restaurant and other services, that the residents are required to pay for). There is also daily/weekly maid service for those unoccupied apartments. They have to be "ready" and in presentable condition when the owner shows up, with no dust or anything.
Are you seriously arguing that a modern supertall condo tower like 432 Park is bringing less property tax revenue for the city than a dingy 20 storey outdated hotel that was demolished? Come on, thats not even an argument.
1. All other NYC condo homeowners qualified for the same tax abatement. My parents did for their condo in Brighton Beach.
2. The tax abatement is not permanent, its only for a set amount of time. I believe the owners at 432 Park didn't even get the best deal. I believe owners at 432 and One57 only got a 10 year deal, while the standard for NYC condo owners is 15 to 25 years.
Again, there is no way that hotel was generating more property tax revenue for the city than an ultra luxury tower 4 times its size. The hotel's business was spread over other NYC hotels (NYC is building those as well!), the net revenue into the city budget went up.
Luxury constructions in NYC, such as 432 Park, account for maybe 1% of the total contruction in the city.
Right, and it's not really going to be a bump from how much the hotel needed to employ. Running a hotel is a lot more intensive. I don't think that needs to be explained. Nor dos the idea that the outdated hotel will bring in more actual revenue to the city--it's not just property tax (which the hotel owner did not have an abatement on), it's hotel occupancy tax, it's additional sales tax from visitors that come in and actually spend a lot more on their trip. I think you're painting this as either a wash of some kind when it isn't. This is not just property tax--I said revenue for the city. This would be offset if the abatement wasn't there or if there were a lot of people declaring it as their primary residence (and their income taxable in NYC), but I believe that's not actually the case. I'd support some kind of additional tax on units that do not have a primary residence registered--how about you?
I agree, luxury constructions on the scale of 432 Park are a relatively small part of the picture. What you see are a lot more a bit downscale, but still luxury constructions throughout the city. The city is really building new residences and a lot of them are fine. These really upscale ones do pretty much nothing in regards to adding supply for local residents though. Is that an inaccurate statement?
Right, and it's not really going to be a bump from how much the hotel needed to employ. Running a hotel is a lot more intensive. I don't think that needs to be explained. Nor dos the idea that the outdated hotel will bring in more actual revenue to the city--it's not just property tax (which the hotel owner did not have an abatement on), it's hotel occupancy tax, it's additional sales tax from visitors that come in and actually spend a lot more on their trip. I think you're painting this as either a wash of some kind when it isn't. This is not just property tax--I said revenue for the city. This would be offset if the abatement wasn't there or if there were a lot of people declaring it as their primary residence (and their income taxable in NYC), but I believe that's not actually the case. I'd support some kind of additional tax on units that do not have a primary residence registered--how about you?
No, you have to compare property tax vs property tax, because the hotel business is not relocatable. You can't build a hotel in Kansas to attract tourists who want to go to NYC, you have to build it in NYC, so all those taxes you listed such as the hotel tax, sales tax, etc are not going anywhere. NYC is seeing a record number of tourists visiting the city, and a record number of new hotel rooms being built.
Let me illustrate the point:
Before 432 Park we had:
A plot of land in Manhattan occupied by the 21 floor Drake Hotel.
A plot of land in Long Island City, Queens that was a parking lot.
After 432 was constructed we had:
A plot of land in Manhattan occupied by a supertall luxury condo tower.
A plot of land in Long Island City, Queens occupied by a 21 floor new hotel that was build as a result of diminishing supply from demolishion of the Drake. The business case closed.
Net result for the budget: Hotel business tax/Tourist business revenue: Hotel tax, sales tax, etc stayed more or less the same, the tourists have to stay near NYC anyway if they want to visit NYC. Their business is either spread out to other Manhattan hotels, or to the new hotel in Queens or other nearby locales.
Jobs: The hotel staff labor stayed the same: either the new hotel had to hire staff to keep up with the new demand for tourists who would have stayed at the Drake, or the other hotels had to pick up the slack.
There were new jobs created: temporary jobs in construction for both 432 Park and the Queens hotel, and new permanent jobs at 432 Park for all the services.
Property Tax Revenue: $32 Park vs Drake hotel, 21 fl hotel in Queens vs parking lot. No brainer here which one brings more revenue to the city.
Other non monetary benefits for the city:
- updating the hotel room inventory from rooms in older buildings to brand new construction hotels with modern safety codes and amenities.
- offloading some of the traffic from Manhattan into the other boroughs.
- creating a new viable thriving neighborhood in Long Island City, or adding amenities to other neighborhoods throughout NYC.
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I agree, luxury constructions on the scale of 432 Park are a relatively small part of the picture. What you see are a lot more a bit downscale, but still luxury constructions throughout the city. The city is really building new residences and a lot of them are fine. These really upscale ones do pretty much nothing in regards to adding supply for local residents though. Is that an inaccurate statement?
These luxury condo towers have absolutely no impact on the supply of units. As I said before, all these luxury highrises account for maybe 1% of total new construction in New York City.
No you are wrong. You have to compare property tax vs property tax, because the hotel business is not relocatable. You can't build a hotel in Kansas to attract tourists who want to go to NYC, you have to build it in NYC, so all those taxes you listed such as the hotel tax, sales tax, etc are not going anywhere. NYC is seeing a record number of tourists visiting the city, and a record number of new hotel rooms being built.
Let me illustrate the point:
Before 432 Park we had:
A plot of land in Manhattan occupied by the 21 floor Drake Hotel.
A plot of land in Long Island City, Queens that was a parking lot.
After 432 was constructed we had:
A plot of land in Manhattan occupied by a supertall luxury condo tower.
A plot of land in Long Island City, Queens occupied by a 21 floor new hotel that was build as a result of diminishing supply from demolishion of the Drake. The business case closed.
Net result for the budget:
Hotel tax, sales tax, etc stayed more or less the same, the tourists have to stay near NYC anyway if they want to visit NYC. Their business is either spread out to other Manhattan hotels, or to the new hotel in Queens or other nearby locales.
The hotel staff labor stayed the same: either the new hotel had to hire staff to keep up with the new demand for tourists who would have stayed at the Drake, or the other hotels had to pick up the slack.
There were new jobs created: temporary jobs in construction for both 432 Park and the Queens hotel, and new permanent jobs at 432 Park for all the services.
Other non monetary benefits for the city:
- updating the hotel room inventory from rooms in older buildings to brand new construction hotels with modern safety codes and amenities.
- offloading some of the traffic from Manhattan into the other boroughs.
- creating a new viable thriving neighborhood in Long Island City, or adding amenities to other neighborhoods throughout NYC.
These luxury condo towers have absolutely no impact on the supply of units. As I said before, all these luxury highrises account for maybe 1% of total new construction in New York City.
Point taken, there was going to be tourists anyways. I'm curious as to that direct connection you made between the hotel in Long Island City and the closure of the Drake Hotel. Is this something they, the owners of the hotel, specifically cited are you extrapolating this on your own?
Other point is that these units have absolutely no impact on the supply of units--that was the point I made in response to another post that we simply needed greater supply. I agreed that was true, but that some projects such as this one don't qualify. These luxury condominiums are the edge case where simply building more of these does not have an impact on the supply of housing units actual residents of NYC are in need of. We're agreed on this.
Do you agree NYC should pursue an additional tax for residential units that are not used as a primary residence?
Point taken, there was going to be tourists anyways. I'm curious as to that direct connection you made between the hotel in Long Island City and the closure of the Drake Hotel. Is this something they, the owners of the hotel, specifically cited are you extrapolating this on your own?
Other point is that these units have absolutely no impact on the supply of units--that was the point I made in response to another post that we simply needed greater supply. I agreed that was true, but that some projects such as this one don't qualify. These luxury condominiums are the edge case where simply building more of these does not have an impact on the supply of housing units actual residents of NYC are in need of. We're agreed on this.
Thanks, I think my previous posts were not clear on why we are comparing property taxes, I am glad the example could clear up some misconseptions. The LIC hotel I used was just an example, not a specific project (although there are hotels under construction in LIC and elsewhere).
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Do you agree NYC should pursue an additional tax for residential units that are not used as a primary residence?
No I don't agree with that. I don't know about other cities, but I think NYC deviates only marginally from the rest of the US cities in relation of residential units not used in primary residents vs total supply. These luxury skyscrapers and highrises we are talking about, while prominent due to their height, take up very limited amount of actual land and very limited amount of new construction supply. Oddly enough, there are probably more single family homes being constructed in NYC compared to these towers, on a unit per unit basis.
To me, the best action for the city would be to significantly and aggressively upzone areas along rail lines and transit hubs in the outer boroughs, make air rights much more easily transferable from landmark buildings to new development plots, attract businesses to set up shop in outer boroughs as well. Offload some Manhattan amenities from Manhattan into the other boroughs to free up valuable land in Manhattan - some city/government agencies, convention center, Port Authority Bus terminal, etc. Trying to create affordable housing in a small chunk of land that happens to be one of the most valuable prime real estate areas in the world is just costing too much in taxpayer money and potential revenue loss, and frankly, quite stupid. The city needs to develop other areas more.
Thanks, I think my previous posts were not clear on why we are comparing property taxes, I am glad the example could clear up some misconseptions. The LIC hotel I used was just an example, not a specific project (although there are hotels under construction in LIC and elsewhere).
No I don't agree with that. I don't know about other cities, but I think NYC deviates only marginally from the rest of the US cities in relation of residential units not used in primary residents vs total supply. These luxury skyscrapers and highrises we are talking about, while prominent due to their height, take up very limited amount of actual land and very limited amount of new construction supply. Oddly enough, there are probably more single family homes being constructed in NYC compared to these towers, on a unit per unit basis.
To me, the best action for the city would be to significantly and aggressively upzone areas along rail lines and transit hubs in the outer boroughs, make air rights much more easily transferable from landmark buildings to new development plots, attract businesses to set up shop in outer boroughs as well. Offload some Manhattan amenities from Manhattan into the other boroughs to free up valuable land in Manhattan - some city/government agencies, convention center, Port Authority Bus terminal, etc. Trying to create affordable housing in a small chunk of land that happens to be one of the most valuable prime real estate areas in the world is just costing too much in taxpayer money and potential revenue loss, and frankly, quite stupid. The city needs to develop other areas more.
I agree the city needs to upzone areas that are major transit nodes in the outer boroughs and encourage commercial development and high-density, mixed use building in those areas (around Broadway Junction and Jamaica Station especially). I think the other part is infrastructure funding so that reasonable distances from the various business districts then expand as more places are brought to within reasonable commute times. The most useful of these would be a larger plan to standardize the three commuter rail networks of NYC and to make all the terminal stations into through-running stations that are linked to each other so that they're all run like a S-Bahn / RER / Express subway service within large parts of the city and then to increase frequencies and speeds for all of them as well as make a better fare integration system among them and the subway.
It makes sense for the city to push on luxury unit vacancy a bit. It's partly to dissuade units from being vacant (there are hundreds of units, if not thousands, that are mostly vacant and some of them quite large) and it's also partly to get some additional revenue for the city from people who can well afford it. I'm fine with landing anywhere on either side of those benefits--just that they should be done. The city can use the revenue for helping move along development in the outer boroughs and these people can afford to part with a bit of funds.
Anyhow, maybe the pied-a-terre tax is too much--perhaps a change in assessment procedures for NYC makes more sense. It'd certainly bring in more revenue and/or move people to get tenants for their mostly vacant luxury homes.
I agree the city needs to upzone areas that are major transit nodes in the outer boroughs and encourage commercial development and high-density, mixed use building in those areas (around Broadway Junction and Jamaica Station especially). I think the other part is infrastructure funding so that reasonable distances from the various business districts then expand as more places are brought to within reasonable commute times. The most useful of these would be a larger plan to standardize the three commuter rail networks of NYC and to make all the terminal stations into through-running stations that are linked to each other so that they're all run like a S-Bahn / RER / Express subway service within large parts of the city and then to increase frequencies and speeds for all of them as well as make a better fare integration system among them and the subway.
There are already plans to do that (or at least to integrate the current commuter rail more) , but there is a huge amount of work to be done. It won't be easy and there are a lot of bottlenecks. Not to mention the rail infrastructure projects in NYC are the most expensive in the world (thanks to MTA).
Right now they are building East Side Access and bringing LIRR to Grand Central terminal (with a new station below grand central and a new tunnel below the East river for the LIRR). That project is budgeted to cost over $10 billion and opens in 5 years (hopefully).
On the New Jersey side, the Gateway Program is probably going to cost over $20 billion and not finish in another 8-10 years. It has a bunch of stuff in there, with the most prominent being the new massive Hudson rail tunnel.
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It makes sense for the city to push on luxury unit vacancy a bit. It's partly to dissuade units from being vacant (there are hundreds of units, if not thousands, that are mostly vacant and some of them quite large) and it's also partly to get some additional revenue for the city from people who can well afford it. I'm fine with landing anywhere on either side of those benefits--just that they should be done. The city can use the revenue for helping move along development in the outer boroughs and these people can afford to part with a bit of funds.
I don't agree with that at all. First, there is no way those billionaires would aquire residency in NYC due to our residency income tax. They would simply sell off their assets and buy in another global city. The reason why NYC real estate is so attractive as an asset class, is because it is considered a safe investment, both from regulatory certainty stand point, and economic/recession proof standpoint. Second, in ultra-luxury segment NYC does not compete with American cities, NYC competes with global cities like London, Dubai, Singapore, etc. Third, let them do whatever they want, it is THEIR property. If they wanna live there - fine, if not, its fine too... this is America afterall. As long as they don't break any laws and pay their property tax, no one should tell what you can or cannot do in your own house. Fourth, and this is less tangible, these *most expensive penthouse* etc stories help NYC as a brand, since they generate stories in the media and in the minds of the global public. NYC gets to charge people a premium just because its NYC, and companies based in NYC gain certain prestige and reputability in certain industries. This is how NYC attracts businesses to come and open up in the city. One thing NYC is very good at, and frankly most other American cities are bad at, is branding. Look what happened to "SOHO" as a brand in the 90s, or "Brooklyn" as a brand much more recently. If southside Chicago or Detroit was a NYC borough, you better believe the marketing execs that work with the local city government would have spun it off as the next *it* place.
There are already plans to do that (or at least to integrate the current commuter rail more) , but there is a huge amount of work to be done. It won't be easy and there are a lot of bottlenecks. Not to mention the rail infrastructure projects in NYC are the most expensive in the world (thanks to MTA).
Right now they are building East Side Access and bringing LIRR to Grand Central terminal (with a new station below grand central and a new tunnel below the East river for the LIRR). That project is budgeted to cost over $10 billion and opens in 5 years (hopefully).
On the New Jersey side, the Gateway Program is probably going to cost over $20 billion and not finish in another 8-10 years. It has a bunch of stuff in there, with the most prominent being the new massive Hudson rail tunnel.
I don't agree with that at all. First, there is no way those billionaires would aquire residency in NYC due to our residency income tax. They would simply sell off their assets and buy in another global city. The reason why NYC real estate is so attractive as an asset class, is because it is considered a safe investment, both from regulatory certainty stand point, and economic/recession proof standpoint. Second, in ultra-luxury segment NYC does not compete with American cities, NYC competes with global cities like London, Dubai, Singapore, etc. Third, let them do whatever they want, it is THEIR property. If they wanna live there - fine, if not, its fine too... this is America afterall. As long as they don't break any laws and pay their property tax, no one should tell what you can or cannot do in your own house. Fourth, and this is less tangible, these *most expensive penthouse* etc stories help NYC as a brand, since they generate stories in the media and in the minds of the global public. NYC gets to charge people a premium just because its NYC, and companies based in NYC gain certain prestige and reputability in certain industries. This is how NYC attracts businesses to come and open up in the city. One thing NYC is very good at, and frankly most other American cities are bad at, is branding. Look what happened to "SOHO" as a brand in the 90s, or "Brooklyn" as a brand much more recently. If southside Chicago or Detroit was a NYC borough, you better believe the marketing execs that work with the local city government would have spun it off as the next *it* place.
Right, there was the recent article for why they are the most expensive in the world--apparently it's because of opulent design and keeping the design and construction bids separate. I think that's something that can be adjusted.
There are a lot of extremely large projects in NYC, but the money is being spent poorly because of bad regional cooperation and planning. Bringing LIRR to Grand Central isn't really much integration at all--it's an entirely separate massive terminal station for LIRR specifically in Grand Central. What makes a lot more sense is what virtually every other city in NYC's tier has done or is doing--turning terminal stations in the core into through-routing trains.
Take for example the New Jersey Transit and Long Island Rail Road trains that currently run to Penn Station from different ends. The lines don't need that much modification to be interoperable and currently empty New Jersey Transit trains actually cut through Manhattan under 33rd Street, on the same tunnels that LIRR uses to get to Penn Station with passengers, to go to the Sunnyside Yard in Queens. There's a lot of inefficiency in that both in having no revenue ridership and also because for the trains that do back out to go back to the direction they came from there's a lot of navigating and waiting for the interlocking parts where the rail tunnels go into multiple terminal berths. If these trains were run straight through, then it's simply idling for a second and then continuing on which is how all other non-terminal stations handle things and is able to process a lot more trains more quickly. What makes sense for this then is that the NJ Transit and LIRR lines going into Penn Station mostly operate as one where they go straight through with passengers and then the commuter sheds for all other non-Penn Station stops now also have a massive commuter shed available for businesses to set up offices in since there is a massive number of people opened up who can easily access these places. Ideally, there'd also be sidings for one intermediate stop on the East Side of Manhattan on 33rd Street (connecting to the 6) and a non-terminal Long Island City stop. Now this seems pretty reasonable, but the political infighting is intense. However, this is probably the most cost-effective way to greatly increase the appeal and commuter shed of secondary CBDs like Jersey City, Newark, LIC, and Jamaica.
As for East Side Access, the staggering cost is from having to build out these cavernous terminal berths underneath Metro-North's many existing platforms. That's an incredible engineering and construction feat that wasn't actually necessary. It would have probably been a cost of the same order of magnitude were there to be through-running tracks built into part of what already exists at Grand Central and then to have bore out a four track line down through Manhattan and then over to Atlantic Terminal (maybe using the Montague Street Tunnel that currently has a lot of excess capacity) with two or three intermediate, smaller stations to make a through-running train that loops from Jamaica into Grand Central, down to Lower Manhattan, over to Atlantic Terminal and then back to Jamaica Station and beyond. If Metro-North and LIRR ever found a way to work together, then a standardized commuter rail system also would have allowed Metro-North to run that loop as well. Unfortunately, the East Side Access costs are already sunk in.
As for the luxury brand argument, sure, that exists to some extent, but much of that is because the wealthy are also attracted to NYC itself due to everything else it offers and the fact that it's a major commercial center. 421A has lapsed and yet construction is still going strong and demand is still high, so that might be an indicator that tax bonuses for luxury housing isn't necessary. If you think the idea of a pied-a-terre tax itself is unfair and that just because someone can pay it doesn't mean they should, fine. At the very least, I think it's reasonable to say that the assessment system as it is is too easy to game. There is something wrong with an assessment system when a condo sold at $90 million dollars gets assessed for property tax akin to that for a property sold at $6 million. Now are grievous assessments issues like this as large a factor in London, Hong Kong, Vancouver, Sydney or Singapore (no clue on Dubai)? Not really, so why does this need to happen in NYC in particular to attract the wealthy? Is there an argument that NYC is a lesser city than London and Singapore so therefore must provide tax rebates, lower property tax rates, no pied-a-terre tax (or non-owner occupied or vacancy tax which is a pretty massive tax in Singapore), no foreign-buyers tax as well as questionable property value assessments for taxes?
I do agree it can be an overall good thing to have extremely wealthy property investors in NYC. However, they should at least be liable to pay property tax rates that are in line with the rates for other residences if not rates that are in line with those of some of the other highly marketable international cities. Perhaps do it cautiously then if you're worrying about investor panic?
Last edited by OyCrumbler; 01-13-2017 at 11:12 AM..
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